First-Time Home Buyer Guide

Buying your first home is one of the biggest financial decisions you will ever make. For many, the process feels confusing, with new terms to learn, mortgage rules to understand, and costs that stretch beyond just saving a deposit. Having a clear guide can make the journey easier, helping you avoid mistakes and prepare properly. This guide for 2025 explains everything from saving for a deposit and improving your credit score to choosing the right mortgage and understanding government support schemes.

Whether you are planning to buy a flat, a house, or looking at shared ownership options, this guide gives you the knowledge you need to move forward confidently. With property prices and mortgage rates always changing, knowing the exact steps to prepare financially is the first key step to becoming a successful homeowner.

What Is a First-Time Buyer?

A first-time buyer is someone purchasing a residential property for the first time, without having previously owned or inherited a home in the UK or abroad. This is important because it decides whether you qualify for government schemes such as Help to Buy or stamp duty relief. Many people assume that if they have never had a mortgage before, they are automatically a first-time buyer, but that is not always correct.

For example, if you once inherited a share in a property, you may not be classed as a first-time buyer, even if you never lived in it. Lenders and the government apply strict definitions, so checking your status early will save you from disappointment. Being classified as a first-time buyer often means better access to mortgage deals with lower deposits and specific financial support, making it easier to get on the housing ladder.

Preparing Financially for Your First Home

Buying a property involves much more than simply saving up for a deposit. You need to make sure your finances are strong enough to cover both upfront and ongoing costs. This preparation includes knowing how much deposit is required, improving your credit score so lenders trust your borrowing ability, and saving for additional costs such as solicitor fees, surveys, and moving expenses.

Planning early makes the mortgage process smoother, increases your chances of approval, and allows you to focus on finding the right property instead of worrying about financial shortfalls. For many buyers, this preparation phase takes several years, so it is worth starting as early as possible.

How Much Deposit Do You Need?

In the UK, most first-time buyers need a deposit of at least 5% of the property value. For example, if you want to buy a £200,000 home, you will need at least £10,000 as a deposit. However, many lenders prefer deposits of 10%–20% because they reduce risk and often give you access to lower interest rates. A bigger deposit means you borrow less, which reduces monthly repayments and makes your mortgage more affordable.

Government-backed schemes sometimes allow you to buy with a smaller deposit, but it is important to weigh up the long-term cost. Remember, the deposit is just one part of the upfront expenses. You also need to budget for stamp duty (if applicable), legal fees, valuation costs, and moving expenses. Creating a savings target that goes beyond the minimum deposit is the best way to avoid financial pressure later.

Saving for a House Deposit

Building a house deposit takes discipline and planning. The first step is reviewing your income and outgoings, then setting a realistic monthly savings goal. Many first-time buyers open a dedicated savings account or use government-supported options like the Lifetime ISA, which gives a 25% bonus on your savings up to £4,000 per year. Automating savings through standing orders helps you stay consistent. Cutting unnecessary expenses, consolidating debts, and boosting income through side work or overtime can also speed up the process.

Some buyers rely on family support, such as gifted deposits, but lenders will ask for confirmation that this money does not need to be repaid. Saving a deposit can feel slow, but breaking it down into smaller goals and tracking progress each month keeps motivation high. With property prices rising, starting early is the smartest move for future homeowners.

Improving Your Credit Score Before Applying

Your credit score plays a huge role in whether you get approved for a mortgage and what interest rate you are offered. Lenders use it to judge how reliable you are at repaying debts. First-time buyers with poor credit may struggle to access competitive mortgage deals, or they may need larger deposits. Improving your score takes time but is achievable with consistent effort. Steps include paying all bills on time, staying within credit card limits, registering on the electoral roll, and avoiding multiple loan applications close together.

Checking your credit report with agencies like Experian or Equifax also helps, as you can spot and fix errors that may be lowering your score. Even small improvements can make a big difference to mortgage approval. Preparing your credit history at least six months before applying for a mortgage is one of the most effective ways to increase your chances of success.

Understanding Mortgages for First-Time Buyers

A mortgage is usually the biggest financial commitment in buying your first home. For many first-time buyers, understanding how mortgages work is crucial to avoid costly mistakes and choose the right product. Mortgages are loans provided by banks or building societies, secured against the property you buy. You repay the loan over a set period, often 25–35 years, with interest added.

Choosing the right mortgage depends on your deposit size, income stability, and how much risk you are comfortable with in terms of interest rate changes. Lenders will assess your finances carefully before approval, looking at your income, debts, and spending habits. By understanding mortgage basics, you can make smarter decisions and compare deals effectively.

What Is a Mortgage and How Does It Work?

A mortgage is a long-term loan specifically for buying property. Unlike personal loans, it is secured against your home, which means the lender can repossess the property if repayments are missed. You repay in monthly instalments that cover both the loan amount and interest charged. The repayment length, or term, varies but is typically 25 years. Mortgages are available through banks, building societies, and specialist lenders.

Each lender offers different rates and conditions. For first-time buyers, knowing how repayments are structured is vital. Early in the mortgage, more of your monthly payment goes to interest rather than the loan itself. Over time, this balance shifts, and you repay more of the original loan. Understanding this helps you see how overpayments or shorter terms can save thousands in interest.

Types of Mortgages Explained

There are several types of mortgages first-time buyers should know:

• Fixed-rate mortgages – Your interest rate stays the same for a set period, usually 2–5 years. This gives predictable monthly payments but may be higher than variable rates.

• Tracker mortgages – These follow the Bank of England base rate plus a set percentage. Payments can rise or fall, so they carry more risk but can be cheaper when rates are low.

• Interest-only mortgages – You only pay interest each month and must repay the loan separately at the end. These are harder to access for first-time buyers and carry higher long-term risk.

Most first-time buyers choose fixed-rate deals because they provide stability, making it easier to budget. However, comparing all options with a broker ensures you find the right balance between flexibility and cost.

What Is Loan-to-Value (LTV) Ratio?

The loan-to-value (LTV) ratio is how lenders measure the risk of your mortgage. It is the percentage of the property’s value you are borrowing compared to the deposit you put down. For example:

Property Price	Deposit	Mortgage Amount	LTV
£200,000	£20,000 (10%)	£180,000	90%
£200,000	£40,000 (20%)	£160,000	80%

A lower LTV (like 60–80%) is considered safer for lenders, so you often get lower interest rates. Higher LTVs (90–95%) carry more risk, meaning stricter checks and higher rates. First-time buyers often start with high LTV mortgages due to smaller deposits, but aiming for at least 10–15% can make borrowing cheaper and improve approval chances.

Mortgage Affordability Checks

Before approving a mortgage, lenders run detailed affordability checks. These checks make sure you can manage repayments without falling into financial stress. They look at:

• Your income – salary, bonuses, or self-employed earnings.

• Regular expenses – credit cards, loans, childcare, subscriptions.

• Stress testing – lenders check if you could still pay if interest rates rise.

Most lenders cap borrowing at around 4.5 times your annual income, though this varies. For example, with a £35,000 salary, you may borrow up to £157,500, depending on other debts and outgoings. Preparing accurate records of your finances, including bank statements and payslips, helps you pass affordability checks more easily.

Government Help for First-Time Buyers

To make home ownership more achievable, the UK government offers several support schemes. These are designed to help first-time buyers struggling with deposits or facing high property prices. Schemes include Help to Buy, Shared Ownership, First Homes, and stamp duty relief. Each works differently and eligibility depends on income, location, and property type. Understanding these schemes early can save you thousands and improve your chances of getting on the ladder.

Help to Buy and Shared Ownership

Help to Buy (Equity Loan) – Although closed to new applicants in England in 2023, some regional versions remain, such as in Wales. This scheme allowed buyers to borrow up to 20% (40% in London) from the government as an equity loan, reducing the deposit needed.

Shared Ownership – This scheme lets you buy a percentage of a property (25%–75%) and pay rent on the remaining share. You can increase your share over time, a process called “staircasing.” It is useful for buyers with smaller deposits but requires careful budgeting for rent and service charges.

These schemes make buying possible for those who cannot afford full ownership upfront, but they come with rules and long-term commitments.

First Homes Scheme (Discounted Housing)

The First Homes Scheme provides new-build properties at a discount of at least 30% below market value for first-time buyers and key workers. The discount stays with the property, meaning future buyers also benefit. Eligibility usually depends on income (generally capped at £80,000, or £90,000 in London) and buying within your local area. While availability is limited, this scheme offers a valuable route for buyers priced out of the market, especially in high-demand regions.

Stamp Duty Relief for First-Time Buyers

Stamp duty is a tax paid on property purchases over certain thresholds. First-time buyers in England and Northern Ireland benefit from stamp duty relief, which means:

• No stamp duty on homes up to £425,000.

• Reduced rates on homes valued between £425,000 and £625,000.

This relief can save buyers thousands. However, it applies only if all buyers are first-time buyers. If one person has previously owned a property, the relief is not available. Understanding these rules helps you avoid unexpected costs when budgeting.

The Step-by-Step Process of Buying Your First Home

Buying your first home involves several steps, each with its own challenges and decisions. Following a clear process makes the journey less stressful and ensures you don’t overlook important legal or financial details. From calculating your budget to moving in on completion day, each stage requires preparation and the right professional support.

Step 1 – Work Out How Much You Can Borrow

The first step is understanding your borrowing power. Lenders usually allow you to borrow around 4–4.5 times your annual income, although this varies with your expenses and credit profile.

For example, if you earn £35,000 a year, you could borrow around £150,000, provided you have a deposit. To get an accurate figure, you should check your credit score, assess your monthly commitments, and use mortgage calculators offered by banks. Setting a realistic budget early avoids wasting time on properties you can’t afford and helps you focus on achievable goals.

Step 2 – Get a Mortgage in Principle

A mortgage in principle (also called an agreement in principle or AIP) is a statement from a lender confirming how much they may be willing to lend. It is not a guarantee, but it strengthens your position when making offers because sellers see you as a serious buyer. Getting an AIP usually involves a soft credit check and a quick review of your finances. Having one in place before you start viewing properties gives you confidence and helps estate agents take your interest more seriously.

Step 3 – Research Locations and Property Types

Choosing the right area and property type is a key decision.

• Flats vs houses – Flats are often cheaper and suit young professionals, but they may come with service charges. Houses offer more space and long-term value but usually cost more upfront.

• Leasehold vs freehold – Most flats are leasehold, meaning you own the property for a set period but not the land. Freehold, common with houses, gives full ownership. Leaseholds often involve ground rent and service charges, which buyers must budget for.

Research should include local transport, schools, regeneration projects, and rental demand (if you plan to rent in the future).

Step 4 – Viewing Properties and Making an Offer

Once you’ve shortlisted areas, arrange property viewings. Look beyond décor and focus on structure, condition, and location factors such as traffic, parking, and noise. It’s wise to view multiple properties before deciding.

When you’re ready, make a written offer through the estate agent. Negotiation is common, so don’t be afraid to offer below the asking price, especially if surveys reveal issues. Having a mortgage in principle and deposit ready strengthens your bargaining power.

Step 5 – Conveyancing and Legal Checks

After your offer is accepted, solicitors or licensed conveyancers handle the legal process. Their role includes:

• Carrying out searches (local authority, drainage, environmental).

• Checking contracts and ownership rights.

• Managing funds for deposit and completion.

You’ll also need a survey and valuation. The lender’s valuation ensures the property is worth the loan, while a survey checks for structural issues. Options range from basic homebuyer surveys to full structural reports. Identifying problems early can save you from unexpected costs or give leverage to renegotiate the price.

Step 6 – Exchanging Contracts and Completion

Exchange of contracts is the point when the purchase becomes legally binding. At this stage, you pay your deposit, usually 5–10% of the property price. Completion typically follows within a few weeks, when the remaining balance is transferred, and you collect your keys. Planning your moving day in advance is essential, book removals, transfer utilities, and arrange insurance to begin on the completion date. This ensures a smooth transition into your new home.

Costs First-Time Buyers Often Overlook

Aside from deposits and mortgage repayments, there are extra costs that can catch buyers off guard.

Mortgage Fees and Arrangement Costs

Most mortgages come with product fees, which can range from £500 to over £1,500. Some lenders allow you to add these to the mortgage, but that increases interest costs. There may also be booking or valuation fees, depending on the deal.

Valuation, Survey, and Legal Fees

Surveys and conveyancing fees are unavoidable. Surveys cost between £250 for a basic report and over £1,000 for full structural checks. Solicitors charge £800–£1,500 for legal work, plus disbursements like search fees.

Ongoing Costs – Insurance, Bills, and Maintenance

Once you own a property, monthly costs extend beyond the mortgage. These include:

• Buildings insurance (required by lenders).

• Utilities and council tax.

• Maintenance and repairs – setting aside 1% of property value annually is recommended.

Budgeting for these costs ensures long-term stability and avoids surprises.

Common Challenges for First-Time Buyers and How to Avoid Them

First-time buyers often face hurdles that delay or derail the process. Common issues include:

• Underestimating hidden costs – Always budget extra for fees and repairs.

• Choosing the wrong mortgage – Seek advice from brokers to compare deals.

• Ignoring resale potential – Pick areas with good transport, schools, or regeneration projects to protect long-term value.

• Rushing into an offer – Multiple viewings and thorough research prevent regrets.

By anticipating these pitfalls, you’ll enter the process prepared and confident.

Your First Step Into Homeownership

Buying your first home is both exciting and challenging. Success depends on preparation, budgeting, and understanding the full process. By saving a solid deposit, securing the right mortgage, and seeking professional guidance, you reduce stress and avoid common mistakes. Government schemes and stamp duty relief also make home ownership more accessible. Starting early, planning carefully, and keeping long-term goals in mind will help you step onto the property ladder with confidence.